Holding deep ITM LEAPS with ~$500k unrealized gain expiring June 2027. Writing short calls against them (Poor Man’s Covered Call). Long term capital gains treatment kicks in mid-2026 depending on how straddle rules are interpreted.
The specific concern is §1092, whether the short call suspends the holding period on the long LEAPS leg or triggers offsetting position treatment. The QCC exception under §1092(c)(4) may or may not apply since the long leg is a LEAPS option rather than actual stock.
A tax attorney has offered to write a formal opinion letter confirming the PMCC qualifies for the QCC exception for $7-10k.
Two questions:
One, is the opinion letter actually worth it as audit protection, or is this a provision that rarely gets enforced at the individual level making the letter overkill?
Two, has anyone here actually seen §1092 enforced on a PMCC structure at the individual taxpayer level?
Is a $10k attorney opinion letter worth it for niche IRS interpretation on $500k unrealized gain?
byu/Wild-Strategy-7990 intax
Posted by Wild-Strategy-7990